Topic: Trade and Immigration

Hollywood For the Stylish

I loved this. It seems that there is a push (led by a fashion lawyer and a fashion show consultant, no less) for Washington, D.C. to get its own version of Chicago’s Magnificent Mile. According to today’s Yeas and Nays column in the Examiner (second item), a few D.C. council members are pushing to create a “Commission on Fashion Arts and Events.” It will “recognize the achievements of D.C.’s burgeoning fashion community” (really) and dedicate a section of the “city’s landscape” for fashion retail.

High-Tech Welfare for High-Tech Billionaires

Voters in a New Mexico county appear to have approved a tax increase to build the nation’s first commercial spaceport. Two other counties will also hold tax referendums before the project can proceed. British billionaire Richard Branson and his company Virgin Galactic have signed a long-term lease to use the spaceport.

But why should the taxpayers of rural New Mexico be paying for facilities for billionaire space entrepreneurs? If the spaceport is going to be profitable, then businesses could pay for it. And even if it weren’t profitable, the space business has attracted the attention of a lot of people with a sense of adventure and billions of dollars, from Branson to Microsoft cofounder Paul Allen, the seventh richest man in America.

The argument to spend tax dollars on the spaceport is very similar to the argument for tax-funded stadiums and convention centers. Proponents say it will bring jobs and tax revenues to the three rural counties. But apparently it isn’t a sure enough thing for businesses to invest their own money.

Cato scholars have argued for years against corporate welfare. The spaceport is a classic example of corporate welfare, though in this case it might better be called billionaire welfare. It will transfer money from middle-class and working people to subsidize businesses and billionaires who won’t have to invest their own money — just like the typical stadium deal, paid for by average taxpayers to benefit millionaire players and billionaire owners.

At least in this case the voters get to decide, which rarely happens with stadium subsidies. The vote pitted “political, business and education leaders” against retirees and groups representing the poor.

“I’m not opposed to the spaceport, but I think it’s a terrible idea to tax poor people to pay for something that will be used by the rich,” said Oscar Vasquez Butler, a county commissioner who represents many of the unincorporated rural colonias where the poorest New Mexicans live, often without proper roads and water and sewage systems. “They tell us the spaceport will bring jobs to our people, but it all sounds very risky. The only thing we know for sure is that people will pay more taxes.”

The USTR Pulls An All-Nighter

With only minutes before a key deadline, the Bush administration formally notified Congress last night that a deal had been reached with South Korea on a free trade agreement. The Office of the United States Trade Representative’s press release (which contains not many details and plenty of the usual mercantalist, all-exports-all-the-time rhetoric) can be viewed here.

As expected, rice was not included in the agreement. Korean negotiators had been adamant that rice, an extremely sensitive (i.e., protected) sector in Korea, was not on the table for negotiation and that a deal would be impossible if the United States insisted on pushing for access to the Korean rice market. On that basis, the Americans evidently decided to drop the rice issue.

Rice was never so much a concern, though, as beef. U.S. beef has been denied access to Korea on food safety grounds since late 2003, when BSE was found in beef originating in Canada. Although the issue was not formally part of the FTA negotiations, and thus was not resolved in the agreement itself, it has the potential to scupper it if lawmakers link their approval of the deal to resolution of the beef dispute. Sen. Max Baucus (D-MT), chair of the Senate Finance Committee, has made it clear that his support for the Korean FTA depends on a full re-opening of the Korean market to U.S. beef. (The Ranking Member of that Committee, Sen. Chuck Grassley (R.-IA), was somewhat more measured in his comments).

Similarly, Sen Debbie Stabenow (D-MI) sees that reducing Korean tariffs (albeit over a long phase-out period for trucks) on U.S. autos and a “restructuring” of the Korean auto tax structure is not enough: her press release insists that she will “do everything in [her] power to defeat this agreement and ensure that any future fast-track authority includes provisions guaranteeing that American businesses and workers can get a fair deal”. Sen. Stabenow does not say what specific measures would assuage her concerns, although one suspects that she is offended at the USTR’s refusal to specify minimum guaranteed sales targets.

In short: yes, the USTR met the deadline of concluding the deal so that it can be considered under fast-track authority. But its passage is far from secured.

More broadly, though, the statements of these lawmakers, especially if it is a taste of what is to come, should worry free-traders everywhere. While bilateral and regional trade agreements are, at best, only the third most optimal way of liberalising trade, the deal between South Korea and the United States was one of the more worthwhile agreements of this administration. And if Congress is going to base support for agreements on its ability to manage trade in certain sectors, then the trade agenda is in serious trouble.

Welfare for the Wealthy (an Ongoing Series)

An earlier post noted the hot political trend of convincing the upper middle class and the wealthy that they are financially vulnerable and in need of government assistance.

From loan subsidies for McMansions to blue-blood public works, from the doling out of market power and financial support to businessmen, to the offering of government money and tax breaks to (usually well-to-do) people who consume in a government-approved manner, politicians of Red stripes and Blue are all about helping the down-and-out in the (gated) community.

Such welfare-for-the-wealthy is the subtext of Sunday’s NYT story about the Children’s Health Insurance Program. CHIP was once intended to help children in families that are low-income but that do not qualify for Medicaid; now Congress is pushing for the state-operated/federally supported program to use its money to cover families up to four times the poverty level (e.g., a family of four earning $82,600 a year) — that is, nearly all families in the second-highest income quintile, aka the upper middle class.

The NYT article includes a provocative figure about the effects of CHIP. When the program was first implemented, the percentage of families with income between the poverty level and 200% of the poverty level (i.e., the families whom the program was intended to help) with uninsured children began to decline, falling from 20% in 1998 to about 12% by 2002. However, the percentage of those lower-income families with privately insured children also began to fall over that time, from about 55% to about 45%. Since 2002, the percentage of uninsured children in that income range has roughly plateaued while the percentage of children with private insurance has continued to fall, to about 35 percent by 2006. This suggests (though, by itself, does not prove) that, by 2002, CHIP had gone about as far as it could go in reducing the percentage of uninsured children in poor families; since then, CHIP has simply displaced private insurance — a dubious policy goal.

Given that, it’s no wonder politicians want to mission-creep CHIP into wealthier income brackets. But one must wonder what the next welfare-for-the-wealthy program will be. Perhaps a chicken in every pot and a Lexus in every garage?

Another Loss for the Online Gambling Nannies

I have yet to digest the official ruling (for the most committed trade nerds, it’s available here), but the United States has been dealt yet another blow in its dispute with Antigua and Barbuda over Internet gambling.

According to a World Trade Organization report released to the public today, the United States has not complied with the rulings and recommendations of a previous panel’s verdict that the United States’ ban on online gambling services was in violation of its commitments to the WTO (more here). Translation: the United States has not made any changes to its restrictions on gambling over the Internet that would make its laws WTO-consistent.

The United States will probably appeal this latest ruling, but if it loses that appeal and continues to refuse to change its laws, then the state of Antigua and Barbuda could retaliate to recover the damage that it claims has accrued to its online gambling industry as a result of the U.S. ban. Retaliation usually involves placing tariffs on the goods of the offending country, in this case the United States. (That is, of course, an economically insane way of “punishing” the violator, but I digress.)

Radley Balko is hoping that Antigua and Barbuda will instead choose to kick the United States where it hurts, and suspend its obligations to protect the intellectual property rights of American companies.

Pure Protectionism

Several years ago, I appeared on the radio show of the late and much-missed David Brudnoy to discuss deregulation of taxicabs. I advocated a free market and an end to licensing and medallions. We got a call from a spokesman for the taxicab industry, who was outraged. Public safety! he exclaimed. “Without licensing, you could have some crazy person driving a cab and have an accident and you could have a mudda an’ a dotta killed! Do you want to be responsible for that?!”

I remembered that call when I saw the letter in the Washington Post from Michael C. Alin, executive director of the American Society of Interior Designers. Responding to George Will’s column on the absurdity of licensing for interior decorators, Alin writes:

In one of the worst hotel fires in U.S. history, 85 lives were lost and more than 700 people were injured at the MGM Grand Hotel and Casino in Las Vegas in November 1980, partly because some of the materials in the interior finish and furnishing fueled a rapid spreading of the fire. If furniture is placed in such a manner that it impedes egress during an emergency, people will die. Should a nonqualified, non-educated person select the materials for the interior of a hospital, school or high-rise building? 

Will had blithely and insensitively mocked the idea of criminal penalties for impersonating an interior designer:

In Las Vegas, where almost nothing is illegal, it is illegal — unless you are licensed, or employed by someone licensed — to move, in the role of an interior designer, any piece of furniture, such as an armoire, that is more than 69 inches tall. A Nevada bureaucrat says that “placement of furniture” is an aspect of “space planning” and therefore is regulated — restricted to a “registered interior designer.”

Placing furniture without a license? Heaven forfend.

I hope that Will is suitably chastened now that he understands the real risks of letting just anyone pick out wallpaper and position furniture.

(Ways and) Means to an End

The House Ways and Means Committee released their trade policy vision on Tuesday, and it should give cause for concern to free-traders who thought a compromise could be reached between the Democratic majority and the administration on how to advance the trade agenda. There are few details on how exactly trade agreements could be made acceptable to Democrats in the immediate future, and plenty of demands that could give potential trade partners cause for alarm.

The administration must give 90 days’ advance notice to Congress when seeking its approval for trade agreements, under the terms of the trade promotion authority delegated by Congress to the President. Because that authority expires on July 1, there are only two working days left to iron out differences on completed trade agreements (those with Peru, Colombia, and Panama, and possibly the still-under-frantic-negotiation agreement with South Korea). The Democrats’ one-pager was lamentably short on details about how to make these agreements acceptable to them.

In the longer-term, if the new majority’s trade strategy is indicative of its overall approach to trade policy (and we have every reason to believe that it is) then negotiated trade liberalization looks to be over for the next two years at least. Unless, of course, the secret 15-page proposal (mentioned in this NY Times piece) presented to the administration contains more of substance, and less of the deal-breaking demands, than what was released to the public.

The details we do have from the one-pager, however, do not paint a pretty picture. The Democrats’ plan proposes new emphasis on labour and environmental standards (including some standards to which, some critics point out, the United States is not a party), non-tariff barriers, calls for immediate action (italics in original) on currency manipulation in China and Japan, and more help for workers displaced by trade. Organized labor has welcomed it, of course, although–bizarrely–so have some Republican members of the committee, including the ranking Republican, Jim McCrery (R-LA). Steven Pearlstein in an article in yesterdays Washington Post, called some of the demands “political poison pills.”

Previous Cato research on some of these topics can be viewed here, and my colleague Dan Ikenson gave an interview on BBC on Tuesday night on the Dems’ proposal: view here.